B-153300, MAR. 18, 1964

B-153300: Mar 18, 1964

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

INCORPORATED: REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 15. BIDS WERE REQUESTED ON FURNISHING ESTIMATED QUANTITIES OF WORK AS THE GOVERNMENT MIGHT SPECIFY AND ISSUE CALLS TO MEET REQUIREMENTS DURING THE PERIOD FROM FEBRUARY 1. THIS PROCUREMENT WAS SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS CONCERNS. TWENTY-ONE SOURCES WERE SOLICITED AND FOUR BIDS WERE RECEIVED. BIDS WERE OPENED ON DECEMBER 31. GATEWAY PRESS HAD SUBMITTED THE LOWEST BID AND WAS BEING CONSIDERED FOR AWARD WHEN A PROTEST WAS RECEIVED FROM LITHO PRESS. ADVISED THE PROCURING ACTIVITY THAT THE DEFINITION OF SMALL BUSINESS SET FORTH IN THE INVITATION FOR BIDS WAS WRONG SINCE IT USED THE SIZE STANDARD APPLICABLE TO A SERVICE INDUSTRY WHEREAS IT SHOULD HAVE USED THE STANDARD APPLICABLE TO A MANUFACTURING INDUSTRY.

B-153300, MAR. 18, 1964

TO GATEWAY PRESS, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 15, 1964, PROTESTING AGAINST THE CANCELLATION OF INVITATION FOR BIDS 01-600-64-48 AND THE READVERTISING FOR THE SAME PROCUREMENT BY THE BASE PROCUREMENT OFFICE, MAXWELL AIR FORCE BASE, ALABAMA.

THE RECORD SHOWS THAT THE SUBJECT INVITATION FOR BIDS, ISSUED NOVEMBER 13, 1963, REQUESTED BIDS FOR FURNISHING ALL LABOR AND MATERIALS REQUIRED FOR THE PRINTING AND BINDING OF CERTAIN AIR FORCE PUBLICATIONS, MOSTLY TEXT BOOKS. BIDS WERE REQUESTED ON FURNISHING ESTIMATED QUANTITIES OF WORK AS THE GOVERNMENT MIGHT SPECIFY AND ISSUE CALLS TO MEET REQUIREMENTS DURING THE PERIOD FROM FEBRUARY 1, 1964, THE DATE OF AWARD OF CONTRACT, THROUGH JANUARY 31, 1965. THIS PROCUREMENT WAS SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS CONCERNS. TWENTY-ONE SOURCES WERE SOLICITED AND FOUR BIDS WERE RECEIVED. BIDS WERE OPENED ON DECEMBER 31, 1963. GATEWAY PRESS HAD SUBMITTED THE LOWEST BID AND WAS BEING CONSIDERED FOR AWARD WHEN A PROTEST WAS RECEIVED FROM LITHO PRESS, INC., A HIGHER BIDDER WHICH CHALLENGED THE SMALL BUSINESS STATUS OF GATEWAY PRESS AND ITS ELIGIBILITY TO RECEIVE AN AWARD UNDER THE SMALL BUSINESS SET-ASIDE PROVISIONS OF THE INVITATION.

UPON RECEIPT OF THE AFORESAID PROTEST, THE CONTRACTING OFFICER SUBMITTED THE QUESTION OF THE SMALL BUSINESS STATUS OF THE LOW BIDDER TO THE LOCAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION. THE SMALL BUSINESS ADMINISTRATION REGIONAL OFFICE, CLEVELAND, OHIO, BY LETTER DATED JANUARY 2, 1964, ADVISED THE PROCURING ACTIVITY THAT THE DEFINITION OF SMALL BUSINESS SET FORTH IN THE INVITATION FOR BIDS WAS WRONG SINCE IT USED THE SIZE STANDARD APPLICABLE TO A SERVICE INDUSTRY WHEREAS IT SHOULD HAVE USED THE STANDARD APPLICABLE TO A MANUFACTURING INDUSTRY. UPON RECEIPT OF THIS INFORMATION AND AFTER VERIFICATION OF THE ERROR IN THE INVITATION, THE CONTRACTING OFFICER DECIDED TO REJECT ALL BIDS, CANCEL THE INVITATION AND READVERTISE FOR THE CONTRACT WITH THE CORRECT DEFINITION OF SMALL BUSINESS. THESE ACTIONS WERE TAKEN, AND A NEW INVITATION FOR BIDS 01-600- 64-75, WAS ISSUED ON JANUARY 14, 1964.

THE CONTRACTING OFFICER HAS REPORTED THAT THE PRINTING AND BINDING SERVICES SUCH AS ARE INVOLVED IN THIS CASE HAVE BEEN PROCURED BY MAXWELL AIR FORCE BASE UNDER CONTRACTS USING TOTAL SMALL BUSINESS SET ASIDES FOR SEVERAL YEARS. PRIOR TO THE ISSUANCE OF INVITATION FOR BIDS 01-600-64-48, THE STANDARD FOR SMALL BUSINESS USED WAS THAT THE NUMBER OF EMPLOYEES OF THE CONCERN AND ITS AFFILIATES MUST NOT EXCEED 500 PERSONS. THIS IS THE SMALL BUSINESS DEFINITION FOR A MANUFACTURING INDUSTRY NOW SET FORTH IN ASPR 1-701.1 (A) (2) B.4. DUE TO CHANGES IN THE STANDARDS FOR SIZE DETERMINATIONS RECENTLY MADE BY THE SMALL BUSINESS ADMINISTRATION, THE APPLICATION OF THE NEW STANDARDS WAS MISINTERPRETED AND IT WAS CONCLUDED THAT THE SIZE STANDARDS APPLICABLE TO A SERVICE INDUSTRY, WHICH IS CURRENTLY SET FORTH IN ASPR 1-701.1 (A) (2) D, APPLIED TO THE PROCUREMENT IN QUESTION. ACCORDINGLY, THE INVITATION DEFINED A SMALL BUSINESS CONCERN AS ONE WHOSE AVERAGE ANNUAL SALES OR RECEIPTS FOR THE PRECEDING THREE FISCAL YEARS DID NOT EXCEED $1 MILLION.

THE RECORD FURTHER SHOWS THAT UNDER THE STANDARD OF NOT MORE THAN 500 PREVIOUSLY USED THE TOTAL NUMBER OF BIDS RECEIVED IN PRECEDING YEARS NUMBERED FROM 15 TO 20. UNDER THE STANDARD ERRONEOUSLY CONTAINED IN INVITATION FOR BIDS 01-600-64-48 OF NOT MORE THAN $1 MILLION OF ANNUAL SALES, ONLY FOUR BIDS WERE RECEIVED. THE CONTRACTING OFFICER HAS STATED THAT AT LEAST TWO PROSPECTIVE SMALL BUSINESS CONCERNS WHICH QUALIFY UNDER THE CORRECT DEFINITION, INCLUDING THE CONCERN WHICH HAD THE PRIOR YEARS CONTRACT, COULD NOT BID BECAUSE THEY DID NOT QUALIFY AS SMALL BUSINESS CONCERNS UNDER THE ERRONEOUS DEFINITION OF SMALL BUSINESS USED IN THE INVITATION FOR BIDS.

YOU CONTEND THAT AN AWARD SHOULD HAVE BEEN MADE TO YOUR COMPANY AS A LOW BIDDER FOR THE REASON THAT IT QUALIFIES AS A SMALL BUSINESS CONCERN UNDER EITHER DEFINITION, MENTIONED ABOVE. YOU CONTEND FURTHER THAT TO CANCEL THE INVITATION AND READVERTISE IS UNFAIR TO GATEWAY PRESS, SINCE THE LOW BID PRICES HAVE BEEN EXPOSED. IN THIS CONNECTION, YOU CITE OUR DECISION B -143263, DECEMBER 22, 1960, TO ESTABLISH THE PRINCIPLE THAT IT IS A SERIOUS MATTER TO REJECT BIDS AFTER THEY HAVE BEEN OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITORS PRICE AND THIS SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS.

QUESTIONS CONCERNING ELIGIBILITY OF PARTICULAR BIDDERS FOR AWARD OF SMALL BUSINESS SET-ASIDES HAVE BEEN BEFORE OUR OFFICE A NUMBER OF TIMES. ASIDE FROM THE GENERAL PURPOSE OF SMALL BUSINESS SET-ASIDE PROCUREMENTS, IT MUST BE REMEMBERED THAT THE PRIMARY PURPOSE OF ADVERTISING FOR SEALED BIDS IS TO OBTAIN THE BEST PRICE WHICH COMPETITION WILL BRING FOR THE GOVERNMENT NEEDS. IT IS ALSO A CARDINAL TENET OF PROCUREMENT UNDER THIS PROCEDURE THAT THE INVITATION SPECIFICATIONS MUST BE AS BROAD AS MAY BE CONSISTENT WITH THE ACTUAL NEEDS OF THE GOVERNMENT, AND THAT SUCH NEEDS MAY NOT BE OVERSTATED. AS WAS POINTED OUT BY YOU IN YOUR LETTER OF JANUARY 15, 1964, OUR DECISION B-143263, DECEMBER 22, 1960, AGREED WITH THE DICTUM OF THE COURT OF CLAIMS IN THE MASSMAN CASE, 102 CT.CL. 699, 719, THAT IT IS A SERIOUS MATTER TO REJECT BIDS AFTER THEY HAVE BEEN OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITORS' PRICE, AND THAT THIS SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS. HOWEVER, IN THIS CASE THOSE COGENT REASONS DEFINITELY DO EXIST. THE REQUIRED DETERMINATION HAS BEEN MADE BY THE CONTRACTING OFFICER THAT THE INCORRECT DEFINITION OF SMALL BUSINESS UTILIZED IN INVITATION FOR BIDS 01-600-64-48 RESTRICTED FULL AND FREE COMPETITION, AND SUCH DETERMINATION HAS BEEN CONFIRMED BY THE AIR FORCE DIRECTORATE OF PROCUREMENT AND PRODUCTION. THIS DETERMINATION IS IN ACCORDANCE WITH OUR DECISIONS IN WHICH IT HAS BEEN HELD THAT AS A GENERAL RULE, AN INVITATION FOR BIDS WHICH IMPROPERLY OR UNNECESSARILY LIMITS COMPETITION BY ITS OWN TERMS IS INVALID. SEE 41 COMP. GEN. 77, 82; 39 COMP. GEN. 563, 564; AND 32 COMP. GEN. 384, 387.

IN VIEW OF THE PARTICULAR CIRCUMSTANCES OF THIS CASE, RESULTING PRINCIPALLY FROM THE UNFORTUNATE INCLUSION OF AN INCORRECT DEFINITION OF SMALL BUSINESS IN THE SPECIFICATIONS INVOLVED, AND CONSIDERING ALSO THE WELL-ESTABLISHED PROPOSITION THAT A REJECTION OF BIDS AFTER OPENING IS A MATTER INVOLVING THE EXERCISE OF SOUND ADMINISTRATIVE DISCRETION, WITH WHICH OUR OFFICE WILL NOT INTERFERE EXCEPT IN CASE OF CLEARLY ARBITRARY ACTION, WE HAVE NO DIFFICULTY IN ACCEPTING THE ADMINISTRATIVE DECISION. THE DISCLOSURE OF THE PRICES BID IS A REGRETTABLE INCIDENT OF SUCH ACTION, WHICH SHOULD BE AVOIDED WHEREVER POSSIBLE, BUT IN THIS INSTANCE WE VIEW THIS CONSEQUENCE AS LESS UNDESIRABLE THAN WOULD BE THE ACCEPTANCE OF YOUR BID, IN THE CIRCUMSTANCES AS SHOWN ABOVE. ACCORDINGLY, WE MUST CONCLUDE THAT THERE IS NO LEGAL BASIS UPON WHICH WE MAY QUESTION THE ADMINISTRATIVE ACTION TAKEN IN THE MATTER, AND YOUR PROTEST MUST BE REJECTED.